BMO LIFE ASSURANCE COMPANY
NOTICE OF ANNUAL MEETING OF THE SHAREHOLDER AND PARTICIPATING POLICYHOLDERS AND MANAGEMENT PROXY CIRCULAR
Annual Meeting to be held on April 23, 2020 TABLE OF CONTENTS
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NOTICE OF ANNUAL MEETING OF THE SHAREHOLDER AND PARTICIPATING POLICYHOLDERS ...... 1 MANAGEMENT PROXY CIRCULAR ...... 2 GENERAL PROXY INFORMATION ...... 3 Solicitation of Proxies ...... 3 Appointment of Proxies ...... 3 Revocation of Proxies ...... 3 Voting of Proxies ...... 3 Outstanding Voting Shares and Policies ...... 4 Principal Holder of Voting Shares ...... 4 ELECTION OF DIRECTORS ...... 4 APPOINTMENT OF AUDITORS ...... 10 CORPORATE GOVERNANCE ...... 10 DIRECTORS’ APPROVAL ...... 10 EXHIBIT “I” FINANCIAL STATEMENTS ...... 11 BMO LIFE ASSURANCE COMPANY
NOTICE OF ANNUAL MEETING OF THE SHAREHOLDER AND PARTICIPATING POLICYHOLDERS
NOTICE IS HEREBY GIVEN that the annual meeting (the “Meeting”) of the shareholder (the “Shareholder”) and participating policyholders (“Policyholders”) of BMO Life Assurance Company (the “Company”) will be held at 2:00 p.m. at 6th Floor, 60 Yonge Street, Toronto, Ontario on Thursday, April 23, 2020, for the following purposes:
(i) to receive the Annual Report and Financial Statements for the year ended October 31, 2019, and the reports of the auditors and the appointed actuary thereon; (ii) to elect directors, with three directors being elected by Policyholders and the remaining six directors being elected by the Shareholder; (iii) to appoint KPMG LLP, Chartered Accountants, as the auditors of the Company; and (iv) to transact such further or other business as may properly come before the Meeting or any adjournment thereof. Policyholders of the Company at the close of business on March 16, 2020 are entitled to notice of the Meeting.
DATED at Toronto, Ontario this 24th day of March, 2020. By Order of the Board,
Penelope Muradya Corporate Secretary
Policyholders who are unable to attend the Meeting in person are requested to date, sign and return the accompanying form of proxy for use at the Meeting or any adjournment thereof. In order to be valid, the enclosed form of proxy must be delivered, in original form (in the return envelope), or by fax at 416-867-6793, so as to reach or be deposited with the President and Chief Executive Officer of the Company at 60 Yonge Street, Toronto, Ontario, M5E 1H5 not later than 10:00 a.m. (Toronto time) on April 22, 2020, or with the Chair or Secretary of the Meeting at any time prior to the commencement of the Meeting, or if adjourned, before any reconvening thereof.
1 12762564.2 BMO LIFE ASSURANCE COMPANY (the “Company”)
MANAGEMENT PROXY CIRCULAR
This Management Proxy Circular (the “Circular”) is being furnished in connection with the solicitation of proxies by management of the Company for use at the annual meeting (the “Meeting”) of the shareholder (the “Shareholder”) and participating policyholders (“Policyholders”) of the Company to be held at 2:00 p.m. at 6th Floor, 60 Yonge Street, Toronto, Ontario on Thursday, April 23, 2020, and at any adjournment thereof.
The Annual Report and Financial Statements of the Company for the year ended October 31, 2019, together with the reports of the auditors and the appointed actuary thereon are attached hereto as Exhibit “I” and will be placed before the Shareholder and the Policyholders at the Meeting. At the Meeting, the Shareholder and the Policyholders will also be asked to elect directors and appoint the auditors of the Company, and to transact such further or other business as may properly come before the Meeting or any adjournment thereof.
It is anticipated that this Circular and the accompanying form of proxy will be distributed to Policyholders on or about March 24, 2020. Unless otherwise indicated, information in this Circular is given as at March 24, 2020.
All information in this Circular relating to the Company has been supplied by management of the Company.
No person is authorized to give any information or to make any representation not contained in this Circular and, if given or made, such information or representation should not be relied upon as having been authorized. This Circular does not constitute the solicitation of a proxy by any person in any jurisdiction in which such solicitation is not authorized or in which the person making such solicitation is not qualified to do so or to any person to whom it is unlawful to make such solicitation. The delivery of this Circular shall not, under any circumstances, create an implication that there has been no change in the information set forth herein since the date of this Circular.
The date of this Circular is March 24, 2020.
2 12762564.2 GENERAL PROXY INFORMATION
Solicitation of Proxies
The information contained in this Circular is furnished in connection with the solicitation of proxies to be used at the Meeting. It is expected that the solicitation of proxies for the Meeting will be made primarily by mail, but proxies may also be solicited personally by officers or regular employees of the Company in respect of the Meeting. The solicitation of proxies by this Circular is being made by or on behalf of management of the Company and the Company will bear the costs in respect of the solicitation of proxies for the Meeting.
Appointment of Proxies
Enclosed with this Circular being sent to Policyholders is a form of proxy. The persons designated in the enclosed form of proxy are directors and or officers of the Company. Each Policyholder has the right to appoint some other person (who need not be a Policyholder of the Company) to attend, vote and act on behalf of the Policyholder at the Meeting. This right may be exercised by inserting the person’s name in the blank space provided in the enclosed form of proxy or by completing another instrument of proxy. The instrument appointing a new proxy must be in writing and must be signed by the Policyholder or such Policyholder’s attorney duly authorized in writing. In order to be valid, executed proxies must be delivered, in original form (in the return envelope), or by fax at 416-867-6793, so as to reach or be deposited with the President and Chief Executive Officer of the Company at 60 Yonge Street, Toronto, Ontario, M5E 1H5 not later than 10:00 a.m. (Toronto time) on April 22, 2020, or with the Chair or Secretary of the Meeting at any time prior to the commencement of the Meeting, or if adjourned, before any reconvening thereof.
Revocation of Proxies
A Policyholder who has given a proxy may revoke the proxy (a) by completing and signing a proxy bearing a later date and depositing it as aforesaid; or (b) by depositing an instrument in writing executed by the Policyholder or his or her attorney duly authorized in writing or, if the Policyholder is a corporation by an officer or attorney thereof duly authorized in writing (i) at the registered office of the Company at any time up to and including the last business day preceding the day of the Meeting, or any adjournment thereof, or (ii) with the Chair or Secretary of the Meeting prior to the commencement of the Meeting on the day of the Meeting or any adjournment thereof; or (c) in any other manner permitted by law.
Voting of Proxies
The person designated in the enclosed form of proxy will vote the voting entitlement of the Policyholder in respect of which such person is appointed proxy in accordance with the instructions of the Policyholder as indicated on the proxy and, if the Policyholder specifies a choice with respect to any matter to be acted upon, such voting entitlement will be voted accordingly. In the absence of such direction, the voting entitlement will be voted (a) for the election of management’s nominees for directors, and (b) for the appointment of KPMG LLP as auditors, all as outlined in this Circular, and (c) at the discretion of the proxyholder on all matters that may properly come before the Meeting and any adjournment thereof, including, without limitation, amendments or variations of any matters set out in the notice of the Meeting.
The enclosed form of proxy, when properly signed, confers discretionary authority upon the representatives designated therein with respect to amendments to or variations of matters identified in the notice of Meeting and with respect to other matters which may properly come before the Meeting. At the date of this Circular, Company management does not know of any such amendments, variations or other matters. However, if any such amendments, variations or other matters which are not now known to the Company management should properly come before the Meeting, the voting entitlements represented by the proxies solicited hereby will be voted thereon in accordance with the best judgment of the person or persons voting such proxies.
3 12762564.2
Outstanding Voting Shares and Policies
As at March 16, 2020, the Company had 16,447 participating policies in force. A participating policyholder is entitled to one vote at the Meeting regardless of the number of participating policies held by such person.
As of March 16, 2020, 10,000,000 common shares of the Company ("Common Shares") were issued and outstanding. Holders of Common Shares of record as at the close of business on March 16, 2020 will be entitled to attend the Meeting and will be entitled to one vote for each Common Share held.
Principal Holder of Voting Shares
As of March 16, 2020, BMO Life Holdings (Canada), ULC owned all of the outstanding Common Shares of the Company, a wholly-owned subsidiary of Bank of Montreal.
ELECTION OF DIRECTORS
The affairs of the Company are managed by a Board of Directors who are elected annually at each annual meeting to hold office until the next annual meeting or until their successors have been duly elected or appointed. The directors are of two classes, with six being elected by the Shareholder of the Company and three being elected by the Policyholders.
The following table sets out the names of each person proposed to be nominated by management for election as a Policyholders’ director, as well as their principal occupation, municipality of residence, the number of meetings attended in fiscal 2019, and the year in which they were first elected director. All three individuals are currently Policyholders’ directors.
Name, Principal Occupation and Director Since Type of Meeting Meetings Total Number Municipality of Residence Attended of Such Meetings in Fiscal Held in Fiscal 2019 2019 PETER ECCLETON 2009 Board 5 5 Retired Chartered Accountant Toronto Audit and Conduct Review 7 7 Committee
MAURICE HUDON 2009 Board 5 5 Retired Bank Executive Toronto Audit and Conduct Review 7 7 Committee
DENISE LANG 2019 Board (a) 3 5 Retired Insurance Finance Executive Toronto Audit and Conduct Review 3 7 Committee (a)
(a) Ms. Lang was appointed a Director and member of the Audit and Conduct Review Committee effective June 4, 2019
4 12762564.2 POLICYHOLDERS’ DIRECTOR BIOGRAPHIES
1. Peter Eccleton (Audit and Conduct Review Committee Member)
Mr. Eccleton retired from PricewaterhouseCoopers in June 2008 after 40 years with the firm. He started his career with PricewaterhouseCoopers in New Zealand and transferred to Canada in 1972. Mr. Eccleton was a senior partner in the firm’s Financial Services practice, with a concentration on the insurance industry. He has had significant involvement with Audit and Conduct Review Committees of client boards.
Mr. Eccleton has been a Member on a number of CICA standard setting committees. These include: the Insurance Accounting Task Force, Task Force on Independence Standards for Auditors of Public Interest Entities, and the Task Force on Impaired Loans. He is a past Member of the Insurance Auditors Advisory Committee to OSFI.
Mr. Eccleton has been a speaker at insurance industry events and conferences, including the CIAA, LOMA and the IASA. He is a founding Director, and past Treasurer, of Bayview Community Services. He is also Director and Treasurer of The Canadian Foundation for Professional Administration.
Mr. Eccleton graduated from the ICD Directors Education program in 2009. He was previously (until 2009) a Director of a Canadian federally regulated financial institution and currently is also a Director of a major Canadian investment management company and a condominium corporation.
Mr. Eccleton obtained a Bachelor of Commerce degree from Otago University, New Zealand, in 1969 and his CA designation in New Zealand in 1972 and Ontario in 1975. He is a Fellow, FCIS, P. Adm., of the Institute of Chartered Secretaries and Administrators.
2. Maurice Hudon (Audit and Conduct Review Committee Member)
Mr. Hudon retired as a Senior Executive Vice President, BMO Financial Group in 2010. He began his career at BMO Financial Group in 1978. He progressed through a series of positions in the branch network in Quebec and, in 1981, was transferred to Toronto where he held positions in human resources serving both the domestic and corporate banking groups.
Mr. Hudon was later appointed Executive Assistant to the Chairman of the Board of Directors, a position he held for four years. In 1992, he received his first executive appointment as Vice President, Community Banking for the West Island of Montreal and four years later was appointed Senior Vice President, Personal and Commercial Lending Services.
In 1998, Mr. Hudon was appointed Executive Vice President of Ontario Division where he was responsible for the operation of the branch network throughout Ontario. Two years later he was appointed President of Personal Banking and Head of Products, Personal and Commercial Client Group. During his three years in this role, he was responsible for the product development and marketing functions for all Personal and Commercial Client Group businesses, including Cardholder Services and Insurance.
In 2003, Mr. Hudon was appointed Senior Executive Vice President and Head of National Office for the Personal and Commercial Client Group during which time he was accountable for the effective operation of the National Office in support of the Sales and Service organization across Canada.
In 2006, Mr. Hudon was appointed Senior Executive Vice President, Personal and Commercial Banking Canada. In this role, he was accountable for operational risk, long-term development initiatives and the separate businesses including Cardholder Services, Insurance, and Broker Services. He took on a broader role as Senior Executive Vice President, Personal and Commercial Banking Canada in June 2009, and was accountable for the development and implementation of customer, market and product strategies for the complete Personal and Commercial banking business in Canada.
Mr. Hudon is a past Chair of the boards of Moneris Solutions Corporation, Bank of Montreal Barbados Limited, Bank of Montreal Insurance Barbados Limited and a former Director of Bank of Montreal Mortgage Corporation. He is a past Director of the Board of Théatre français de Toronto, past Chair of St. Joseph’s Health Centre Foundation, past Board Member of Toronto Central Local Health Integration Network and a volunteer at Good Shepherd Ministries, Toronto.
5 12762564.2 Mr. Hudon holds an undergraduate degree in business administration from Concordia University. In 1985, Mr. Hudon completed his MBA degree at the University of Western Ontario.
3. Denise Lang (Audit and Conduct Review Committee Member)
Ms. Lang is an Actuary and retired Insurance Finance Executive.
After graduating from university in 1980, Ms. Lang worked in actuarial valuation and pricing roles obtaining broad experience in Canadian Life Insurance. She rose through the ranks to become the Vice President (“VP”), Canadian Business Actuarial for the Clarica Life Insurance Company. After Sun Life Financial purchased Clarica in 2002, she worked with Sun Life Financial Canada as VP, Risk, Capital and Compliance.
In 2005, she joined Manulife Financial as VP and CFO, Individual Wealth Management. In this role, she was accountable for financial management, pricing, compliance and planning processes. In 2008, she was appointed VP and CFO, Reinsurance Division during which time she was accountable for financial management, compliance and planning. She also managed Manulife’s Affiliate Reinsurance. She was appointed VP, COO/CFO, Reinsurance and Corporate Projects, Manulife Financial in 2011. In this role, Ms. Lang was accountable for financial and business management of run-off and affiliate reinsurance businesses, financial leadership for P&C Retrocession and certain Corporate Actuarial projects.
In 2014, Ms. Lang joined the Canada Mortgage and Housing Corporation (CMHC) as VP & Chief Actuary. In that role, she led all actuarial analysis processes for the mortgage insurance business. After retiring from CMHC, she worked as an Actuarial consultant on part-time basis with Foresters Financial with a primary focus on IFRS17 implementation.
Ms. Lang holds a BSc degree in Actuarial Mathematics (Gold Medalist) from University of Western Ontario. She qualified as a Fellow of the Society of Actuaries and as a Fellow of the Canadian Institute of Actuaries (CIA) in 1982. She was very active in the CIA, serving as chair or member for numerous committees and was a Director on the CIA Board from 2015 to 2018.
In the absence of contrary instructions, the persons named in the enclosed form of proxy intend to vote in favour of the nominees whose names are set forth above.
The following table sets out the names of each person proposed to be nominated by management for election as a Shareholder’s director, as well as their principal occupation, municipality of residence, all positions and offices of the Company held, the number of meetings attended in fiscal 2019, and the year in which first elected director. Management of the Company has been informed by BMO Life Holdings (Canada), ULC, the Shareholder, that it intends to vote in favour of the nominees set forth in the following table.
Name, Principal Occupation Office(s) held in Director Type of Meeting Meetings Total Number and Municipality of Residence the Company Since Attended of Such in Fiscal Meetings 2019 Held in Fiscal 2019 THOMAS BURIAN Chair 2014 Board (a) 5 5 Chief Financial Officer, Wealth Management, Bank of Montreal Mississauga
PETER MCCARTHY President and 2008 Board 5 5 Senior Vice President & Chief Executive President, Bank of Montreal Officer Toronto
DENIS MCHUGH 2018 Board 4 5 Head of Enterprise Market Risk and Chief Risk Officer, BMO Capital Markets, Enterprise Risk & Portfolio Management, Bank of Montreal New York 6 12762564.2 Name, Principal Occupation Office(s) held in Director Type of Meeting Meetings Total Number and Municipality of Residence the Company Since Attended of Such in Fiscal Meetings 2019 Held in Fiscal 2019 LITSA DIMITRIOU Chair of the Audit 2019 Board 4 5 Senior Lead Financial Officer, and Conduct Corporate NIX, Financial Review Performance Management Bank Committee Audit and Conduct 4 7 of Montreal Review Committee Toronto (b)
NADIM HIRJI 2019 Board 4 5 Senior Vice President & Head, Canadian Commercial Banking, Bank of Montreal Mississauga
BRETT PITTS 2019 Board (c) 3 5 Chief Digital Officer, Bank of Montreal Toronto
(a) Mr. Burian was appointed Chair of the Board effective April 23, 2019. (b) Ms. Dimitriou was appointed as Chair of the Audit and Conduct Review Committee effective April 23, 2019. (c) Mr. Pitts was appointed a director of the Company effective August 5, 2019.
SHAREHOLDER’S DIRECTOR BIOGRAPHIES
1. Thomas Burian (Chair)
Mr. Burian is Chief Financial Officer, Wealth Management, Bank of Montreal. He is responsible for providing financial leadership, financial governance, strategic direction and decision support to the Wealth Management Leadership Team. As Chief Financial Officer, he manages a team of financial professionals in Canada, United States and Europe.
Mr. Burian brings a strong track record as a finance leader. During his career with BMO Financial Group, he has held various positions within Canadian Personal and Commercial, as well as Finance Director roles in Wealth Management. Prior to this appointment, Mr. Burian held the position of Vice President, Financial Performance Management for Total Bank and oversaw the redesign of the annual planning process, the development of the non- trading enterprise stress testing capability, and successfully led the finance due diligence on the acquisition of F&C Asset Management plc.
Mr. Burian currently serves as Chair and Director of BMO Life Assurance Company and BMO Life Insurance Company. He is a Director of BMO Asset Management Inc., BMO Castle Mount Private Equity GP Inc., BMO Investments Inc., BMO Monthly Dividend Fund Ltd. and BMO Private Investment Counsel Inc.
Mr. Burian holds a Bachelor Business Administration from the Schulich School of Business and is Chartered Professional Accountant.
2. Peter McCarthy (President and Chief Executive Officer)
Mr. McCarthy is Senior Vice President and President, BMO Insurance. He is also the Chief Executive Officer, BMO Life Assurance Company and BMO Life Insurance Company. He began his insurance career in Halifax, Nova Scotia in 1986 in the head office of Maritime Life (a John Hancock subsidiary) and worked in a number of capacities in administration, management and sales management throughout all lines, including employee benefits, segregated funds, and individual life insurance.
7 12762564.2 In May 1999, Mr. McCarthy joined AIG Life Insurance Company of Canada as the National Sales Director. In 2000 he was appointed President and Chief Executive Officer of AIG Life Insurance Company of Canada. In April of 2009 AIG Life Insurance Company of Canada was acquired by Bank of Montreal.
Mr. McCarthy is the Deputy Chair and a Director of BMO Reinsurance Limited and Bank of Montreal (Barbados) Limited. He also serves as a Director of BMO Life Holdings (Canada), ULC, BMO Life Insurance Company and BMO Estate Insurance Advisory Services Inc.
Mr. McCarthy is a past Chairman of the Canadian Life and Health Insurance Association (CLHIA) and a Director of the Canadian Association of Financial Institutions in Insurance and the Cancer Research Society. He is a Member of the International Society of Trust and Estate Practitioners (STEP) and holds their TEP designation. He also serves as Chairman of the Ladies First Hockey Foundation, supporting the Women’s National Ice Hockey Team.
3. Denis McHugh
Mr. McHugh is Head of Enterprise Market Risk and Chief Risk Officer, BMO Capital Markets, Enterprise Risk & Portfolio Management, Bank of Montreal. He is accountable for market, counterparty, and liquidity risk enterprise wide and works closely with the management team to drive the strategic agenda of the Capital Markets business.
Mr. McHugh has worked in the global financial markets businesses throughout his career of over 25 years with a strong background in Fixed Income where he has run global teams of derivative and cash traders and sales. He moved into Market Risk Management for a rival global firm in 2010 as its Head of Market Risk Management and joined BMO Financial Group in 2015. He has worked in New York, London, Paris, Frankfurt and Amsterdam.
Mr. McHugh currently serves as a Director of BMO Life Insurance Company.
Mr. McHugh received his Bachelor of Arts in Economics from Washington University in St. Louis.
4. Litsa Dimitriou (Audit and Conduct Review Committee Chair)
Ms. Dimitriou is Senior Lead Financial Officer, Corporate NIX, Financial Performance Management, Bank of Montreal. She is responsible for planning, forecasting, reporting and allocations for the Corporate Functions including Finance, HR, Marketing and Risk.
In her previous role as Director, Financial Performance Management, Ms. Dimitriou was responsible for providing financial leadership, strategic insight and decision support to the Wealth Management businesses including Insurance. She managed a team of financial professionals in Canada and directed planning, forecasting and reporting activities globally for Wealth.
During her career with BMO, Ms. Dimitriou has held various positions with increasing responsibilities within finance and risk including roles in Canadian Personal and Commercial Banking, Capital Markets, Corporate and Technology & Operations. Prior to her current role, Ms. Dimitriou was Lead Financial Officer for Retail & Commercial Credit Cards in Canadian Personal and Commercial Banking. In this role she provided financial advice and decision support to the Credit Card leadership teams. In addition to planning forecast and reporting responsibilities, Ms. Dimitriou provided financial leadership for the Retail Cards re-platforming initiative and financial support to the BMO Moneris board members.
She serves as a Director of BMO Life Insurance Company.
Ms. Dimitriou holds a Bachelor of Science in Applied Math and an M.B.A. from York University. She is a Chartered Professional Accountant.
5. Nadim Hirji
Mr. Hirji is Senior Vice-President & Head, Canadian Commercial Banking, Bank of Montreal. He is responsible for the strategic growth and leadership of Canadian Commercial Banking within BMO Bank of Montreal. Canadian Commercial Banking is a dedicated team of over 600 people committed to driving growth through best-in-class relationship management while sustaining top-tier customer loyalty. This team provides upper mid-market
8 12762564.2 companies with a single point of access to financial options with an integrated suite of commercial debt products, M&A advisory, mezzanine finance & equity, treasury & payment solutions, and deposit products and services.
Mr. Hirji, who has 27 years of industry experience, began his career at BMO in 2003 and after progressing through several senior roles, received his first executive appointment as Head, Ontario and Atlantic Canada in 2008, and then later as Head , Prairies Region in Canadian Commercial Banking. Most recently, he was the Head of Special Accounts Management Unit (SAMU) where he was responsible for developing the Enterprise’s overall strategic direction for SAMU, balancing portfolio risk/return, and maximizing the value of assets while returning capital to the organization through timely and innovative resolutions.
Within BMO Bank of Montreal, he serves on the Board of BMO Life Insurance Company and is a voting member of the BMO Corporate Donations Committee.
Mr. Hirji serves on the Board of the Canadian Business Growth Fund, a $545 million fund dedicated to supporting Canadian entrepreneurs and is on the Board of the Providence Healthcare Foundation including acting as Chair of the Silver Ball Gala, which aims to raise over $1 million annually in support of the foundation.
Mr. Hirji holds an MBA from Dalhousie University and is a Fellow of the Institute of Canadian Bankers.
6. Brett Pitts
Mr. Pitts is the Chief Digital Officer, Bank of Montreal. He leads the bank’s digital portfolio and oversees North American virtual channel experiences and operations for digital and the contact centre. He is responsible for accelerating BMO’s digital agenda to deliver industry-leading customer experiences and encourage digital adoption for its customers and team.
The BMO Digital team is comprised of Canada and U.S. digital strategy, experience, and platforms for sales, marketing, and servicing experiences, as well as the North American Customer Contact Centre (the NACCC). With teams across North America, the NACCC provides assisted service to millions of customers annually through phone and other collaborative capabilities including email, messaging, chat/chatbots, and social media.
Prior to joining BMO in 2017, Mr. Pitts spent 17 years at Wells Fargo, most recently as the Executive Vice President and Group Head of Digital, responsible for all aspects of the bank’s digital channels and experiences for the company’s retail customers, including consumer, small business, wealth and digital payments. This included accountability for almost 30 million active digital customers and over 5.5 billion interactions per year.
Mr. Pitts is a Director of Moneris Solutions Corporation. He currently serves as a Director of BMO Life Insurance Company.
Mr. Pitts has an MBA, specializing in Management Information Systems, from the Eller Graduate School of Management at the University of Arizona, and a bachelor’s degree in Marketing and Finance from the University of Texas at Austin.
9 12762564.2 APPOINTMENT OF AUDITORS
KPMG LLP has been the auditors of the Company since the acquisition by Bank of Montreal on April 1, 2009. It is proposed that KPMG LLP be reappointed at the Meeting, or at any adjournment thereof, as auditors of the Company to hold office until the close of the next annual meeting of the shareholder and participating policyholders. The reappointment of KPMG LLP as auditors must be approved by a majority of the votes cast at the Meeting. In the absence of contrary instructions, the persons named in the enclosed form of proxy intend to vote in favour of the appointment of KPMG LLP, Chartered Accountants, as auditors of the Company, to hold office until the next annual meeting of the Company. Management of the Company has been informed by BMO Life Holdings (Canada), ULC, the Shareholder, that it intends to vote in favour of the appointment of KPMG LLP.
CORPORATE GOVERNANCE
The Company believes in the importance of good corporate governance and the central role played by directors in the governance process. The Company believes that sound corporate governance is essential to the well-being of the Company, its shareholder and policyholders.
The mandate of the Board of Directors, which it discharges directly or through the Audit and Conduct Review Committee, is to supervise the management of the business and affairs of the Company, and includes responsibility for strategic planning, review of operations and the risks associated with the Company’s diverse businesses, the oversight of financial and other internal controls, corporate governance, director orientation and education and Board of Directors assessment.
The primary mandate of the Audit and Conduct Review Committee is to assist the Board of Directors in fulfilling its oversight responsibility for the integrity of the Company’s financial reporting; the effectiveness of the Company’s internal controls; the performance of the Company's internal and external audit functions; the Company’s compliance with legal and regulatory requirements; transactions involving related parties; conflicts of interest and confidential information; and standards of business conduct.
DIRECTORS’ APPROVAL
The contents of this Circular and the sending thereof have been approved by the Board of Directors of the Company.
Dated: March 24, 2020
Penelope Muradya Corporate Secretary
10 12762564.2 EXHIBIT “I” FINANCIAL STATEMENTS
11 12762564.2
BMO Life Assurance Company Participating Policyholder Dividend Policy
Table of Contents
1. Background ……………..……………………………………………………………………. 2 2. Definition of Participating Policy...... ……………………………………………………... 2 3. Eligibility………………………………..……………………………………………………... 2 4. Assessment of Fairness……………….…………………………………………………… 2 5. Source of Funds …………………………………………………………………………….. 3 6. Amount of Distribution …………………………………………………………………….. 3 7. Shareholder Transfers ……………………………………………………………………... 3 8. Declaration of Dividend Scales …………………………………………………………... 3 9. Frequency of Declaration and Distribution ….……………………………………….… 3 10. Changes to Dividend Policy……………………………………………………………… 4
Appendix A – Participating Policyholder Dividends for HLIC Participating Account 5 Appendix B – Participating Policyholder Dividends for NULIC Participating Account 6
BMO Life Assurance Company - Participating Policyholder Dividend Policy 1
1. BACKGROUND
BMO Life Assurance Company (“BMOLA” or “Company”) is governed by the Insurance Companies Act of Canada (“ICA”).
The Company maintains two separate participating funds for participating policies business from the following acquisitions:
1999 – Hartford Life Insurance Company of Canada, referred to as “HLIC” 2002 – Norwich Union Life Insurance Company (Canada), referred to as “NULIC”
The HLIC participating policies receive dividends in the form of cash dividends. The NULIC policyholders receive dividends predominantly in the form of reversionary and temporary bonus.
This dividend policy applies to participating policies of the Company.
2. DEFINITION OF PARTICIPATING POLICY
A “Participating Policy” for this Policy is defined as a policy issued by the Company that entitles its holder to participate in the profits of the Company. Generally, participating policies are distinguished from other policies by the existence of policyholder dividends.
3. ELIGIBILITY
All participating policies are eligible to receive distributions in respect of their polices, commonly referred to as policy dividends, as declared from time to time at the discretion of the Company’s Board of Directors based on the recommendations of the Appointed Actuary in accordance with applicable law. These dividends are the normal mechanism used for the sharing of profits with policyholders. However, there are cases where policyholder dividends are zero, fixed or minimal. In cases where the policyholder contract states that the policy is participating, such policies are subject to all of the participating requirements of the ICA and OSFI Guidelines.
4. ASSESSMENT OF FAIRNESS
The dividend allocation process followed by the Company in respect of participating policyholders recognizes the contributions made by the policies to the two participating accounts where they belong. Not all polices contribute to the same extent or at the same time, and there are certain practical limits, legal constraints and prevailing practices that apply to the allocation in some circumstances. This process seeks to achieve reasonable equity between classes of policies and between generations of policies. In order to determine the contribution of policies, policies are grouped into classes with common characteristics.
BMO Life Assurance Company - Participating Policyholder Dividend Policy 2
5. SOURCE OF FUNDS
The source of participating policyholder dividends will be the retained earnings of the participating fund that is maintained in accordance with the requirements of the Insurance Companies Act.
6. AMOUNT OF DISTRIBUTION
The amount of policyholder dividends to be distributed each year will be influenced by the following:
(1) the total net income from the participating funds
(2) the emerging earnings experience of the participating funds
(3) the projected impact of continuing the current dividend scales on the future level of retained earnings of the participating fund
(4) the minimum continuing capital and surplus requirements of the company, both currently and as projected
(5) the company's philosophy with regard to surplus in the participating fund.
7. SHAREHOLDER TRANSFERS
Transfers from the participating fund to the shareholders' fund will be taken into account when determining the amount of bonuses to be distributed. The amounts to be transferred will be no greater than those amounts prescribed by legal and regulatory requirements.
8. DECLARATION OF DIVIDEND SCALES
The Board of Directors of the Company shall declare participating policyholders dividend scales after reviewing the written dividend recommendation of the Appointed Actuary.
9. FREQUENCY OF DECLARATION AND DISTRIBUTION
Dividend scales will normally be declared annually, although the company reserves the right to determine such scales more frequently.
Dividends will be distributed annually.
BMO Life Assurance Company - Participating Policyholder Dividend Policy 3
10. CHANGES TO DIVIDEND POLICY
The Dividend Policy is subject to change from time to time at the discretion of the Board of Directors of the Company, subject to applicable law. The principal factors that might cause the Board of Directors of the Company to review this policy include legislative or regulatory changes, significant corporate restructuring, significant unforeseen events, or a desire to clarify the policy.
BMO Life Assurance Company - Participating Policyholder Dividend Policy 4
Appendix A – Participating Policyholder Dividends for HLIC Participating Account
1. FORM OF DIVIDEND
Dividends for the Participating Account for HLIC participating policies with take the form of Cash Bonuses.
BMO Life Assurance Company - Participating Policyholder Dividend Policy 5
Appendix B – Participating Policyholder Dividends for NULIC Participating Account
1. FORM OF DIVIDEND
The reversionary bonus method will be employed to calculate individual policy bonuses.
With respect to life insurance plans, dividends will take the form of Bonus Additions (additional amounts of paid-up insurance) of various types.
With respect to annuity plans, dividends will take the form of Cash Bonuses.
2. BONUS ADDITIONS
Life insurance plans receive bonus additions that are of two types, each of two sub- types:
(1) Reversionary Bonuses (i) Simple (ii) Compound
(2) Temporary Bonuses (i) Additional (ii) Special
The attributes of each type of bonus addition and how they vary are as follows:
Reversionary Bonuses
All participating life policies issued prior to 1979 are allotted Simple Reversionary Bonuses.
Those policies issued after 1978 are allotted Compound Reversionary Bonuses.
The attributes common to both reversionary bonus sub-types are:
(1) the death benefit of each bonus once declared is guaranteed as long as the policy remains in force and the bonus has not been surrendered
(2) such bonuses have cash surrender values employing various bases determined by the company from time to time
(3) the amount of bonus varies according to the bonus series under which the policy was issued and the face amount of the policy.
Compound Reversionary Bonuses also vary in amount in accordance with the amount of previously declared reversionary bonuses still attaching to the policy at the time such bonus is allotted.
BMO Life Assurance Company - Participating Policyholder Dividend Policy 6
Temporary Bonuses
A participating policy may earn no temporary bonus, either sub-type or both sub- types, according to the bonus series under which the policy was issued.
The attributes common to both temporary bonus sub-types are:
(1) the death benefit of each bonus is guaranteed for a limited period only, currently one year from the date earned, as long as the policy remains in force and the bonus has not been surrendered. Whilst the company intends to maintain the scales of such bonuses, it reserves the right to reduce or eliminate such bonuses at the end of the one year guaranteed period at its discretion.
(2) the amount of bonus varies according to the bonus series under which the policy was issued.
Temporary bonuses differ by sub-types as follows:
(1) Additional Temporary Bonuses also vary in amount according to the amount of previously declared reversionary bonuses still attaching to the policy at the time such bonus is earned. Such bonuses may or may not have cash surrender values, according to the bonus series under which the policy was issued. Any cash surrender value is determined in accordance with a basis determined by the company from time to time.
(2) Special Temporary Bonuses also vary in amount according to the face amount of the policy. Currently, such bonuses have no cash surrender values.
3. CASH BONUSES
Annuity plans receive Cash Bonuses that vary in amount in accordance with:
(1) the bonus series under which the policy was issued
(2) the cash surrender value of the policy
4. SPECIAL FUNDING ARRANGEMENT
The company made special funding arrangements for those participating policies transferred from The Norwich Union Life Insurance Society in 1997.
In addition to assets assigned to the participating fund to meet policyholders' reasonable expectations, assets were assigned to fund the cost of future projected shareholder transfers with respect to these policies. The amount of such assets recognized the expected income taxes applicable to net investment income earned by the assets.
BMO Life Assurance Company - Participating Policyholder Dividend Policy 7